--Glencore buys undisclosed minority stake in Brazil's Ferrous
Resources
--Ferrous to supply Glencore with 20 million tons of iron ore
over four years
--Glencore has exclusive negotiating rights to raise stake
further
(Updates with additional comments from Ferrous Resources and
additional background)
By Diana Kinch and Alex Macdonald
LONDON--Commodities titan Glencore International PLC (GLEN.LN,
GLNCY) has purchased an undisclosed minority stake in Brazilian
iron-ore producer Ferrous Resources Ltd., marking its first
investment in an already producing iron-ore company.
Ferrous also said Wednesday that it has agreed to supply
Glencore with 20 million metric tons of the steelmaking raw
ingredient over four years, at an average of five million tons of
iron ore a year.
The announcement will help Ferrous fund its expansion plans
after two failed attempts to list in London over the past few
years. "The deal will guarantee a great deal of the Company's
production until 2016, in addition to strengthening the company's
financial position, since it will reduce cash-flow demands and will
substantially decrease commercial risks," said Ferrous's Chief
Executive Jayme Nicolato.
Ferrous Resource produced 3.2 million tons of iron ore in 2012
and plans to produce five million tons this year, rising to 17
million tons as of 2016.
Glencore's equity investment and commercial supply agreement
reflects growing interest from commodities-trading groups to expand
into the lucrative sea-borne iron-ore market where the world's top
three iron-ore producers--Brazil's Vale SA (VALE) and Anglo
Australian miners Rio Tinto PLC (RIO.LN, RIO) and BHP Billiton Ltd.
(BHP, BHP.AU), account for about 60% of global production,
according to data provided by GMP Securities.
Glencore has already has signed commerical iron-ore marketing
agreements with West African iron-ore miners London Mining PLC
(LOND.LN), African Minerals Ltd. (AMI.LN), and Bellzone Mining PLC
(BZM.LN) while commodities-trading company Vitol has signed a
similar agreement with London Mining.
Glencore has also been interested in Brazil and was reported by
Reuters last year to have been one of four bidders interested in
Anglo American PLC's (AAL.LN, AAUKY) Amapa iron-ore mine in Brazil
before Zamin Ferrous Ltd. acquired the asset.
A person familiar with Glencore deal with Ferrous Resources said
that Glencore has exclusive negotiating rights to increase its
holding in Ferrous in exchange for project funding.
Write to Diana Kinch at diana.kinch@dowjones.com and
Alex Macdonald at alex.macdonald@dowjones.com
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